Who receives interchange fees?

Interchange fees are a key component of merchant processing costs, but many merchants wonder who actually receives these fees. Understanding the flow of interchange fees can help businesses better manage their payment processing expenses.

Who Receives Interchange Fees?

Interchange fees are paid by the merchant’s acquiring bank to the cardholder’s issuing bank every time a credit or debit card transaction occurs. These fees compensate the issuing bank for the risks and costs associated with providing credit, fraud protection, and transaction processing.

The Role of Different Parties in Interchange Fees

• Issuing Bank: Receives the interchange fee to cover transaction risks and processing costs.
• Acquiring Bank: Pays the interchange fee on behalf of the merchant and manages the merchant’s account.
• Card Networks: Facilitate the transaction but do not receive interchange fees; they charge separate network fees.

For merchants, interchange fees are bundled into the overall processing fees charged by their payment processor or acquiring bank. These fees vary based on card type, transaction method, and other factors.

To better understand and manage these fees, merchants can use tools like Merchant Statement Scanner to analyze their processing statements. This software can scan a PDF statement to identify interchange fees and other charges, helping businesses optimize their payment processing costs.

Next Steps for Merchants

• Review your merchant processing statements regularly.
• Use Merchant Statement Scanner to identify and understand interchange fees.
• Compare fees across different processors or acquiring banks.
• Discuss fee structures with your payment processor to negotiate better rates.

Related guides in this hub

• Why do rewards cards cost more to accept?
• Why do interchange rates change?
• Why do business cards cost more to accept?
• Visa EIRF and Standard Downgrades
• Small-Ticket Interchange Explained